Easier? U.S. Department Of Labor Publishes 146-Page Notice With Proposed Regulations To "Make It Easier" To Distinguish Employees From Independent Contractors

— President Ronald Reagan, August 12, 1986

One of the most intractable problems in employment law is sometimes knowing whether someone working for someone else is an "employee" or not. Getting that right or wrong can have enormous legal consequences for the worker and the person or firm by whom the worker is engaged. One might think that making such a distinction would always be pretty easy.

Alas, not so. Courts and executive agencies charged with enforcing the law have long struggled with that very question.

The Trump Administration has now weighed in. The U.S. Department of Labor ("DOL"), on February 26, 2026, published a "notice of proposed rule" (the "Notice") to "help workers and employers better understand how to determine when a worker is an employee and when the worker may be classified as an independent contractor under the Fair Labor Standards Act and related federal laws." The goal, says the related news release, is to "make it easier to properly differentiate between employees with the protections under the Fair Labor Standards Act and those workers who work as independent contractors."

The "preamble" in the Notice, which explains why the goal should be attempted at all, is about 135 pages long. That the explanation is so long makes one wonder what to expect of the promised simplicity of the new regulations, which themselves consist of only 11 pages.

The proposed new regulations, in any case, would amend those pertaining to the Fair Labor Standards Act ("FLSA"), Family and Medical Leave Act ("FMLA"), and Migrant and Seasonal Agricultural Worker Protection Act ("MSPA"). They are, for now, merely proposed. They can be seen here. The DOL will take comments about them until April 28, 2026.

The upshot of the proposed regulations appears to be a new emphasis on "economic dependence as the ultimate inquiry," that is, a focus on whether a worker "is, as a matter of economic reality, in business for" himself or herself. As put by one of the proposed regulations:

That isn't especially new. But this arguably is: "Economic dependence does not focus on ... whether the worker has other sources of income." That seems inconsistent with the acknowledgment that whether an "employer" has "suffer[ed] or permit[ed] an individual to work as an employee" depends in part on whether the individual is, "as a matter of economic reality, ... economically dependent on that employer for work." Such dependence seems all but assured if the worker has, well, no "other sources of income". The courts and executive agencies will have to sort that out.

The proposed new regulations offer other "factors" for consideration as to whether a hypothetical worker is economically dependent on a putative employer, in the service, don't forget, of making the "employee vs. independent contractor" distinction easier.

Here's a summary of the other factors (most of which quote the new regulations verbatim):

• The nature and degree of control over the work. This factor weighs towards the individual being an independent contractor to the extent the individual, as opposed to the potential employer, exercises substantial control over key aspects of the performance of the work, such as by setting his or her own schedule, by selecting his or her projects, and/or through the ability to work for others, which might include the potential employer's competitors. In contrast, this factor weighs in favor of the individual being an employee under the Act to the extent the potential employer, as opposed to the individual, exercises substantial control over key aspects of the performance of the work.
• The individual's opportunity for profit or loss. This factor weighs towards the individual being an independent contractor to the extent the individual has an opportunity to earn profits or incur losses based on his or her exercise of initiative (such as managerial skill or business acumen or judgment) or management of his or her investment in or capital expenditure on, for example, helpers or equipment or material to further his or her work.
• The amount of skill required for the work. This factor weighs in favor of the individual being an independent contractor to the extent the work at issue requires specialized training or skill that the potential employer does not provide. This factor weighs in favor of the individual being an employee to the extent the work at issue requires no specialized training or skill and/or the individual is dependent upon the potential employer to equip him or her with any skills or training necessary to perform the job.
• The degree of permanence of the working relationship between the individual and the potential employer. This factor weighs in favor of the individual being an independent contractor to the extent the work relationship is by design definite in duration or sporadic, which may include regularly occurring fixed periods of work, although the seasonal nature of work by itself would not necessarily indicate independent contractor classification. This factor weighs in favor of the individual being an employee to the extent the work relationship is instead indefinite in duration or continuous.
• Whether the work is part of an integrated unit of production. This factor weighs in favor of an individual being an independent contractor to the extent his or her work is segregable from the potential employer's production process. This factor weighs in favor of the individual being an employee to the extent his or her work is a component of the potential employer's integrated production process for a good or service.

Again, much of this isn't new; courts have considered such issues for decades when deciding whether a worker is an employee or not. But the proposed regulations do provide a few helpful "illustrative examples", which can be seen found in the proposed regulations.

Many of the proposed revisions to the FLSA regulations also apply to the FMLA and MSPA, because a determination of whether someone is protected by those laws, as with the FLSA, hinges on who is and isn't an "employee".

One has to give credit to the DOL for trying to simplify a subject that, in many ways, defies simplicity. But the subject is what it is – complex and multi-layered – and probably cannot be made much more accessible than it is, despite the current effort. Any doubt about that fades away on reading this, which is the proposed regulations' attempt to summarize the relevant concepts:

The difference between the employment relationship under the FLSA and that under the common [meaning judge-made] law arises from the fact that the term "employ" as defined in the Act includes "to suffer or permit to work." The courts have indicated that, while "to permit" requires a more positive action than "to suffer," both terms imply much less positive action than required by the common law. The courts have said that there is no definition that solves all problems as to the limitations of the employer-employee relationship [as opposed to the independent contractor relationship] ...; and that determination of the relation cannot be based on isolated factors or upon a single characteristic or technical concepts, but depends "upon the circumstances of the whole activity" including the underlying "economic reality."

One can see from that just how thorny the issue is. The Notice is intended to help us "better understand how to determine when a worker is an employee and when the worker may be classified as an independent contractor under" the FLSA, the MSPA, and FMLA, but much work obviously remains to be done.

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